Reputation is the most important asset entrusted to a CEO. Not all CEOs recognize that, but a growing number do. In a 2009 global study, AON Insurance asked 551 CEOs to rank the relative importance of 31 risk factors. Reputation was ranked No. 6. In past AON studies before the current financial crisis, reputation was the top-ranked CEO risk factor. But, what is troubling is that two-thirds of the respondents still have no “formal reputation risk plan” in place, and that figure has not changed substantially.

This finding doesn’t surprise me. CEOs recognize that reputation is a derivative of many things and would like to manage it the way other risk factors are managed, i.e., put it into a formal, strategic process. While PR has talked a lot about reputation, most PR people continue to define their role primarily as messengers or crisis managers.

The corporate communications officers who are part of the C-Suite know that they’re being asked to think and act as business executives, not merely as communicators. They’re being asked to provide the reputation strategy, but my experience is that most chief communications officers (CCO) do not know how to manage reputation as a process, nor do their PR firms.

We need to begin with a definition of reputation. I would suggest that reputation is the expectation of value that a stakeholder has of an organization vis-a-vis its peers and competitors.Most definitions of reputation focus on experiences. To deliver desired experiences, we first must understand and manage expectations.

Stakeholders first judge an organization on whether or not it’s relevant to their value expectations compared to others in the same peer or competitive set. While the critical stakeholders for every organization are its employees, customers and investors, every stakeholder has the potential to create, enhance or destroy value, either directly or in concert with others.

Reputation is the perceived competitive value is the gap between companies in meeting stakeholder expectations. The gap helps determine the ceiling on price, the unexplained market value variations between competitors, the ability of one company to attract and keep the best talent, and better media coverage, etc. Perceived value is competitive and therefore not infinite. The value one organization creates comes from others.

Reputation management, then, is the management of stakeholder expectations in order to maximize the perceived competitive value of the organization. This is a market system called “Stakeholder Capitalism,” in which we see potential value and risk to value in the network effects of all stakeholders. We seek to acquire and retain “stakeholder share” of our key stakeholders to create greater value for an organization, industry, or other entity.

I advocate a process that integrates business strategy, marketing, branding, organizational engagement and communications. Through this integration, the organization creates “a formal reputation risk plan” that allows it to identify where and how it creates perceived value with each stakeholder and where there are gaps. The process manages reputation cross-functionally and at all “touch points.” The research that is done focuses on key reputation metrics.

Considerable success has come from managing the process with a “Stakeholder Relations Council,” which has usually been chaired by a communications professional. The members include those from other “stakeholder relations functions,” e.g., marketing, sales, HR, investor affairs, among others. The Council develops an integrated “reputation scorecard” with specific objectives and metrics for each member. As part of the process, communications not only is “at the table” but it also can find itself at the head of the table.

One company using this process found that it actually gained market share as it managed itself above the “line of expectations” of its industry; yet another found gaps in its sales processes that were undermining its reputation. The process is “ready made” for corporations to learn, adapt and implement, but PR agencies could develop such a strategy service.

Two-thirds of the corporate market is looking for a strategic process to manage reputation. The need is clear. Will the CCOs be up to the challenge, or will companies turn to marketing for leadership? Will companies find help from their PR firms, or will they need to turn to consulting firms? Public relations professionals have a choice to make. They can stay with their current approach to reputation that is not meeting the need of the market, or adopt a new approach and offer a new service. It will require training, new knowledge and a new approach. What will the choice be?

Elliot S. Schreiber, Ph.D. is clinical professor of marketing and executive director of the Center for Corporate Reputation Management, LeBow College of Business, Drexel University, Philadelphia. During his career, he has been in sales, corporate strategy, marketing and communications. He was CCO at Bayer, Pittsburgh, and CMO and CCO at Nortel, Toronto. He later was president of a strategy-consulting firm. He also heads his own consultancy, Brand and Reputation Management LLC.He holds a Ph.D. in Communication (1977) from Penn State.

13 Comments

I like your integrated management approach. It is a holistic way to address what I argue is the real basis of reputation: behavior not communications. Organizations that behave badly cannot hope to have good reputations, no matter how good their PR or communications department is. Communications people can have no hope of actually affecting the reputation of an organization if they have no input into its behavior. (I discuss this in detail in the following blog post: http://tinyurl.com/24prdvj.)

I’ve recommended something akin to your “Stakeholder Relations Council” as a way to manage environmental threats (that is the people in the organization responsible for the stakeholder group hopefully have insight into the concerns of that group. So those responsible people can help generate a list of issues to monitor [see blog post: http://tinyurl.com/4dbdt3f%5D). But taking the idea all the way to managing relationships with each stakeholder group is even better.

Thanks for your comment. You are absolutely right. Reputation is based more on behaviors than on communications. Communications may seem to win for a while, but the organization’s behaviors ultimately determine whether we have a sustainable reputation. If the organization cannot deliver on its desired behavior, it must be fixed first. That is a key role for the Stakeholder Relations Council–looking for gaps in how the organization creates perceived value. Organizational engagement is an element of the process I use. My own company’s tagline is “Live Your Brand; Grow Your Reputation”.

BP for many years had an incredibly effective communications program going, convincing us that they were “Beyond Petroleum”, remaking their logo to a flower, telling us how environmentally focused they were. Perhaps at one time those things were true, but the organization failed to deliver on that promise. They talked the walk rather than walked the talk. Sadly, their crisis not only damaged BP, but also the entire oil industry’s reputation since they had set themselves up as the leader upon whom expectations were established. Toyota similarly damaged the entire Japanese car category with their recall problems. Honda, Mazda and others also lost market share despite doing nothing wrong. Leaders set expectation standards in a category. It is important to make certain that one can live to the standards one espouses.

The use of a council to manage environmental threats is an interesting one. It seems to serve the same purpose, namely, to get in one room those who understand the stakeholder and feel that they “own” the relationship with the stakeholder. Reputation is a shared ownership across the company, yet most companies continue to compartmentalize it. We need to stop worrying about whether PR or marketing own reputation and realize that it cannot be owned by any one function. It is a derivative of organizational actions interpreted differently by different stakeholders. Instead of trying to declare ownership of something that cannot be owned, I would like to see PR become the leaders and catalysts of processes that allow the organization to manage the reputation asset strategically. The organization wins and PR moves into a strategic business leadership position.

Your last paragraph takes us back to why PR people need to understand how organizations (read businesses) work and why they need to be business people first, if they expect to be effective communicators. The one factor I would introduce here is the importance of the PR border-spanning role.

In my mind, PR is the one place in the organization that should work to understand the wants and needs of all stakeholders. The council idea is a way to do this if the council members actually understand the wants and needs of the stakeholder group for which they are responsible. A very solid foundation for PR’s role in effective reputation management would be ensuring stakeholder group understanding by encouraging research with those groups so the organization can manage from the perspective of information and insight rather than guesses and assumptions.

Too, in doing this, PR might span not only external organizational borders, but internal borders as well through sharing this information (as through the council). This could help break down the silos inside and create better overall alignment between the organization and all its stakeholders.

Agree totally, Forrest. PR has a broader perspective of stakeholders than any other function. But, here’s the catch with that statement. It owns the outcome of very few. In other words, it has a perspective of employee relationships but does not own the outcome–that would belong to the HR head, if you ask most CEOs; investors would belong to IR, which often is part of Finance; etc. So, we need for PR people to become more business oriented and also recast their relationships with stakeholders to see them as outcome based rather than simply perspective, relationship or output based. I did this when I was at Bayer and then at Nortel. I rewrote the objectives of my head of advertising to be head of customer acquisition and retention. He stopped talked about advertising and started talking about outcomes; the head of employee communications became responsible for showing how she enhanced employee satisfaction; the head of financial communications was no longer responsible for the annual report, but rather for investor confidence; etc. And, they were expected to develop metrics to document that they made inroads. We have got to stop talking about what we do and start talking about what we achieve–what the outcome was.

I just read an interview with Paul Holmes in which he says that all things being equal, PR should be in charge of marketing because PR has a fuller view of stakeholders and marketing only looks at customers. First, that is an outdated and narrow view of marketing, which has progressed perhaps even more than PR (there is a growing stakeholder marketing discipline). But, per our conversation here, PR has got to show the CEO that they not only have an understanding of stakeholders, but that they also can translate that into value to the company. Measure changes in perceived value and show how those changes impact reputation and we will now be speaking a language others in the C-Suite understand and respect and one which communicators as business people should not shy away from.

Elliot, your comments help explain the bigger picture in corporate America (and beyond). Online technology, the rise in influence of the citizen’s voice and forced transparency have expanded the role of the PR industry in every phase of the professional world.

Thanks, Shannon. I was not focused on the large global issues, but it does suggest that we all need to understand expectations and manage those, both on-line and off. You work in the on-line world. The Internet has helped strip control from corporations, governments and other centralized institutions by moving information and knowledge to the “edges of the network”. Companies use the Internet but also need to understand its sociology. We just had a Twitter revolution in Egypt. Everyone needs to wake up to the new “world order”, as you put it. Thanks for sharing.

[…] management has assumed in the industry. As we mentioned last year, Elliot Schreiber, PhD, wrote a must-read PRSA blog post stressing the importance of “a formal, strategic process” for reputation management. The United […]

[…] most do not have a formal reputation risk plan in place,” he said in a March 1, blog post on the Public Relations Society of America site. He also warned that PR professionals are using an approach that is no longer meeting the […]

[…] management has assumed in the industry. As we mentioned last year, Elliot Schreiber, PhD, wrote a must-read PRSA blog post stressing the importance of “a formal, strategic process” for reputation management. The United […]